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Smuggling Takes Toll on Clothing Industry

Iran’s clothing industry has long been reeling under the detrimental effects of smuggling, to the point that from a total of $10 billion worth of domestic demand per annum, $7-8 billion worth of clothing are smuggled, an official with Tehran Apparel Union said.

Mehdi Mahmoudi added that smugglers are not bothered with production expenses and benefit from high profit margins, therefore they are more inclined towards the illegal trade.

Mahmoudi noted that since Iran’s textile industry is in the doldrums, fabric is also smuggled into the country, the Persian daily Forsat-e Emrouz reported.

“Smuggling damages both textile and clothing industries at home. Smugglers do not pay any sort of tax or insurance, and most Iranian merchants purchase outmoded and low quality Chinese, Turkish or Thai items that are sold cheap in the local market,” says Masoud Shabakhti, CEO of Jamehbaft Co.—a producer of winter clothing.

According to the business owner, the tendency to buy foreign brands is due to the fact that these companies spend a considerable amount of money on advertising and are familiar with people’s tastes in fashion.

“This requires a proper knowledge of marketing, which is of course a capital-intensive business. All Iranian firms are striving to keep the industry on its feet against this backdrop,” he said.

Siavash Esmaeelpour, a successful clothing business owner, noted that in order to revive domestic production, the government needs to grant low-interest loans and tax exemptions so as to encourage producers and investors.

The clothing industry has the potential to create jobs in large numbers. According to Esmaeilpour, in some heavy industries 40 trillion rials ($11.5 billion at market exchange rate) can create only 150 jobs, whereas in the clothing industry the same amount can create as many as 40,000 jobs.